The Most Innovative Companies 2019: The Rise of AI ...

The Most Innovative Companies 2019

The Rise of AI, Platforms, and Ecosystems

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The Most Innovative Companies 2019

THE RISE OF AI, PLATFORMS, AND ECOSYSTEMS

MICHAEL RINGEL FLORIAN GRASSL RAM?N BAEZA DEREK KENNEDY MICHAEL SPIRA JUSTIN MANLY

March 2019 | Boston Consulting Group

CONTENTS

3 INNOVATION IN 2019 Digital Natives Lead, but Others Are in Fast Pursuit Two New Forces One Additional Thought

8 AI POWERS A NEW INNOVATION MACHINE A Strong Correlation Where to Focus? AI at Scale Build Versus Buy "Alexa, Innovate!"

1 3 HOW PLATFORMS AND ECOSYSTEMS ARE CHANGING INNOVATION

It's an External Game Some Rules of Ecosystem Engagement 1 8 NOTE TO THE READER

2 | The Most Innovative Companies 2019

INNOVATION IN 2019

Users of Google's email software recently found that Gmail was offering to finish their sentences for them. This new Smart Compose feature relies on Google's expertise in artificial intelligence (AI) and machine learning (ML), along with billions of training examples and the company's cloudbased Tensor Processing technology, to intuit what Gmail users want to say--often faster than they can complete their own thoughts.

In a world where computers can compose notes to your friends, it's hardly surprising that the theme of BCG's 13th annual global innovation survey and report is the rising importance of AI and of platforms that support innovation. This is not an out-of-the-blue development. Our last few reports have highlighted the crucial role of science and technology in innovation, the impact of digital technologies on both digital natives and more traditional industries, and strong innovators' increasing use of various internal and external vehicles to uncover new ideas. This year's survey shows that AI use is rapidly expanding and that many companies are relying more on platforms and their cousin, ecosystems, to support their innovations efforts.

Digital Natives Lead, but Others Are in Fast Pursuit

The companies on BCG's most innovative list for 2019--especially those in the top ten--

extensively use AI and platforms. (See Exhibit 1.) Alphabet/Google, which unseats Apple at number one after a 13-year reign, is an "AI first" company, according to its CEO. It has long embraced both platforms (think Android) and ecosystems (consider how Alphabet has worked with others to develop Waymo, its autonomous driving venture). Next in line is Amazon, which, besides using AI in its retail business, has pioneered voice recognition technology (Alexa) and platform-based services (Amazon Web Services). Apple, at number three, helped pioneer voice recognition software (Siri) and provided a premier virtual workplace for app developers with its iOS platform. Fourth-place Microsoft has also evolved from a software company into a provider of AI and platform-based services.

All of the ten highest-ranking companies-- and many in the top 50--use AI, platforms, and ecosystems to enable themselves and others to pursue new products, services, and ways of working. For example, McDona ld's (number 21) uses an AI algorithm to serve digital menus that continuously change in response to such factors as time of day, day of the week, restaurant traffic, and weather. Philips (number 29) launched an AI platform in 2018 that helps "scientists, software developers, clinicians, and health care providers access advanced analytic capabilities to curate and analyze health care data and offers them tools and technologies to build, main-

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